Forrester Fashions has monthly credit sales of 29,000 units with an average collection period of 65 days. The company has a per-unit variable cost of 17 and a per-unit sale price of 26. Bad debts currently are 4.5% of sales. The firm estimates that a proposed relaxation of credit standards would increase the average collection period to 86 days and would increase bad debts to 7% of sales, which would rise to 43,500 units per month. Forrester's cost of capital is 0.9% per month. Show all necessary calculations needed to evaluate Forrester's proposed relaxation of credit standards. (Note: Assume a 365-day year.)

Sales revenue _____________

Variable cost _____________

Contribution _____________

Bad debts _____________

Interest _____________

Total _____________

Should the new policy be accepted?